The opinion of the court was delivered by: Baker, District Judge.
ORDER GRANTING SUMMARY JUDGMENT
In this diversity action, the plaintiff, George Fabe (Fabe),
Superintendent of Insurance of the State of Ohio, as liquidator
of Proprietors' Insurance Company, an Ohio Corporation, with its
principal place of business in Delaware, Ohio (P.I.C.), seeks to
recover premiums and commissions from the defendant, Facer
Insurance Agency, Inc., a Delaware Corporation, with its
principal place of business in Rantoul, Illinois (Facer). More
than $10,000 exclusive of interest and costs is at issue. See
28 U.S.C. § 1332. The material facts in the case are not in dispute
and each party has moved for summary judgment. See Fed.R.Civ.P.
P.I.C. was in the business of insuring against risks associated
with aviation and, as "the Company", on January 17, 1980, entered
into an Agency Agreement in writing with Facer as "the Agent."
That contract provided generally that the agent was to procure
proposals for contracts of insurance covering risks that the
Company lawfully could insure against. As they apply to this
case, the pertinent parts of the Agency Agreement are that:
[T]he agent may collect, receive, and receipt
premiums on insurance proposals tendered to and
accepted by the Company, and may hold such premiums
as a trustee, separate and apart from all the other
moneys belonging to the Agent and retain out of
premiums so collected, as full compensation for
business placed with the company, commissions. . . .
Money due the Company on business placed by the
Agent with the Company shall be paid in full no later
than forty-five (45) days following the end of the
month in which policies become effective.
If the Company shall return or refund to any
insured the whole or any part of premiums from which
the Agent has retained commissions and/or charges,
the Agent shall promptly repay to such insured the
same proportionate part of retained commissions
After issuance by the Company of any contract of
insurance directly to an insured, the Agent shall be
liable to the Company for the earned premium on each
policy or binder of insurance solicited and written
through the Agent, whether the same shall have been
collected or not.
Pursuant to the Agency Agreement, Facer solicited proposals,
and P.I.C. wrote contracts of insurance for which premiums were
collected and forwarded and commissions retained. Then, on July
30, 1981, Fabe's predecessors in office were appointed
Conservator of P.I.C. by the Court of Common Pleas of Franklin
County, Ohio, to oversee the rehabilitation or liquidation of
The Ohio Court enjoined:
. . all persons having claims against the Defendant
[PIC] from instituting or continuing any action;
other than in this liquidation proceeding, which
would (1) interfere . . . with the possession,
control, title, rights, or interests of the
liquidator . . . (2) tend to give rise to
a . . . preference, judgment, attachment, lien or the
making of a levy against the Defendant [PIC] or its
property or assets subject to the liquidator's
At various times between July 30, 1981, and September 4, 1981,
all of the policies of insurance procured by Facer for P.I.C.
were cancelled by Fabe, or his predecessors, acting under orders
of the Ohio courts. On July 30, 1981, P.I.C.'s records show and
Facer admits, that there was $20,453.47 due on account to P.I.C.
from Facer as total premiums, both earned and unearned, for
policies of insurance procured by Facer. There is also no dispute
that on January 31, 1982, $9,580.75 was the amount of Facer's
commissions on unearned
premiums resulting from the cancellation of the P.I.C. policies
written by Facer.
Fabe claims that Facer is liable for all the premiums due on
July 30, 1981, without regard to whether the policies on which
the premiums were due were subsequently cancelled and
irrespective of whether the premiums became unearned premiums. It
is also Fabe's position that Facer must seek its remedy for any
offset for unearned commissions in the Ohio liquidation
proceedings and, for that purpose, Facer must take its place as
a general creditor of P.I.C.
Facer, on the other hand, contends that it is not liable to
P.I.C. for unearned premiums and that the insolvency of P.I.C.
and the cancellation of the policies, relieved Facer of its
responsibility to forward premiums. As to the unearned
commissions, Facer says it credited the cancelled policyholders
for the amounts of those commissions when Facer wrote new
policies to take the place of the cancelled P.I.C. policies.
Facer asserts that the commissions rightfully belonged to the
policyholders and not to P.I.C. and that Facer, therefore,
returned the commissions to the policyholders.
Facer argues, and Fabe does not contest, that the law of
Illinois is applicable to this case. See Klaxon Company v.
Stentor Electric Manufacturing Company, 313 U.S. 487, 61 S.Ct.
1020, 85 L.Ed. 1477 (1941). "Under traditional Illinois conflict
of law principles, the validity, construction and obligation of
a contract are determined by the law of the place where it is
made and performed." (Footnote omitted.) Zlotnick v. ...